An Open Letter to Tony Hsieh

Dear Tony,

First of all, let me start by stating that I truly admire what you’ve achieved. Your book, describing your path from LinkExchange to Zappos, from culture-by-accident to the deliberate creation of an awesome company based on culture, was an inspiration for us at GrantTree. The idea of optimising a company for employee happiness, as well as the knowledge that someone else had done this on a much larger scale than my cofounder and I, were invaluable guideposts on a road less travelled, towards cultures built upon openness and respect.

I also completely agree with where you’re trying to take Zappos. I believe that teal/open (or holacratic) cultures are a better way to operate, in many ways, with many advantages, at the very least for the people working there. I wholeheartedly agree with the objective you’re pursuing.

However, as someone who has, over the last couple of years, helped an open culture come to life, albeit on a much smaller scale at GrantTree, I find myself worried by your approach towards implementing Holacracy and the “Teal” model described by Frédéric Laloux.

I am not a culture consultant. I am not a social scientist. I am not a coach. But I am a founder of a company that, over the last couple of years, transitioned to a model that shares some features with Holacracy, and has a lot more in common with the Teal organisations described by Laloux, which I like to call open cultures. I don’t know whether you’re aware of the points below. You may very well disagree with them, and you may well be right and I wrong. I offer them up humbly hoping they might be of use to you.

My observations fall into a few key categories. First, an observation about basic respect for the individual. Then, concerning two of the key “breakthroughs” of Teal organisations according to Laloux: self-management and wholeness. Then concerning holacracy itself. Finally, concerning the agenda of open cultures itself.

As a final caveat, I should add that I don’t have any insider knowledge as to what’s going on inside Zappos itself. Perhaps the picture that emerges from reading the memo is incorrect. Perhaps things are going swimmingly and I’ve misinterpreted all the cues I’m sensing.

1. Respect for the individual

The first and perhaps most important point I observe is that the approach displayed in the memo seems, at least from the outside, to have little respect for individuals. I don’t doubt your personal commitment to creating a respectful workplace: it is a fundamental building block of happiness, and of course of trust.

And I think trust is the problem here. Open culture systems like Holacracy are fundamentally reliant on trust. It is the basic currency of an open culture company. And disrespect towards individuals does not breed trust: instead, it’s highly corrosive to trust.

In order for things like tension processing1 to function, you need trust. Without trust that they will not be needlessly punished for their opinions, people cannot be candid. Without candour, tensions are not brought to the circle’s attention and therefore cannot be resolved.

The message in the memo, “get on board with holacracy now or leave”, broadcast to the entire company and to the world at large, does not seem respectful of individual differences. Instead, it seems hostile to individuality, trying to cut everyone into the same mould without respecting or even listening to or acknowledging their differences. Starting from this premise, it can only alienate people and cause them, even if they were ready to progress to a better perspective, to regress back to a “me vs them” point of view which is toxic to Holacracy and any open culture agenda.

I respectfully urge you to consider approaching this important transformation in a more patient way, more respectful of individual differences.

2. Self-management

Holacracy is a model of self-management. It dispels the need for people managers, and distributes the responsibility for decisions to people throughout the organisations. This is great – when it works.

Self-management cannot work with people who do not want it. You can’t make people self-manage any more than you can make people love. Trying to impose self-management top-down is a bit like grabbing someone by the shoulders and screaming at them, “I want you to love me, now, spontaneously! Why don’t you love me?”

In order for people to want self-management, they need two things: to personally, viscerally believe that it is good for them; and to believe that it is possible. Both of those are things that take time. It took us two years to transition 10-20 people to self-management. We did not have the clarity of vision that you have, so you may be able to do this more quickly, but getting 1400 people to do anything will always be a challenge.

Even after 210 people have left, chances are there are many, many left who do not yet want self-management. No matter how much you try to impose it from above, they will not take responsibility for their work until they want to. And the more you try to force them to take responsibility, the less they’ll want to.

I hope that you will be willing to consider giving people more time and more examples of self-management to inspire them, rather than attempting to inspire self-management via top-down orders.

3. Wholeness

You quote Frédéric Laloux’s book quite substantially in your memo. The second “breakthrough” that he identifies as part of Teal cultures is wholeness.

What this means in the context of work culture is have the space, at work, to bring your whole self to work. This is something that has unfolded at GrantTree over the years and, for me, one of the most inspiring consequences of open cultures. When people feel free to be themselves instead of being cut down to size, they expand and swell to become superb versions of themselves. This touches every area of their life, from personal life to work life. It is truly inspiring to see people rise past their personal and emotional limits and fully grow into themselves. If I were to pick one single achievement in my life to be proud of, this is it: being instrumental in creating an environment that has enabled this to happen.

However, this breakthrough cannot happen without respect for the individual. When you push people into a “me vs them” mindset, you force them back into a fear-driven mode of operation. In that mode, they cannot be themselves: they are afraid of showing who they are for fear of being punished. Only a truly respectful, trust-based environment can achieve this breakthrough.

Once again, I request that you consider how to adjust your approach to open companies so it shows deep respect for individual differences rather than attempting to cut everyone down into the same mould.

4. Holacracy

Holacracy is a fascinating system, full of interesting ideas. I have felt its seductive pull myself, but I always resisted it. This was not because I was afraid of losing power or authority, quite the opposite. It was because I did not feel that it was well suited to GrantTree’s chaotic, freedom-loving ways. It seems too rigid, too structured. Yes, it promises that through this structure personal freedom will be achieved. Not all promises come through, though.

A first crack in Holacracy’s armour comes from noticing that it takes an all-or-nothing approach. Either you implement all of Holacracy, or none of it. This approach to open cultures belies the experience of all of the companies in Laloux’s book, all of which evolved open, teal culture systems progressively, over time. Skepticism turns to suspicion when I realise that the “all or nothing” argument enables easy evasion if Holacracy fails to deliver any improvement to company culture. It gives an easy way out of “well, you didn’t really adopt the whole thing properly, it’s hard, don’t beat yourself up for it”.

Another crack comes in practice, from noticing issues with it. GrantTree adopted some parts of Holacracy – specifically, something called a Holarchy, which is a way to organise work hierarchically without organising people hierarchically. Ironically, it was by following the language suggested by Holacracy that we fell into Holarchy’s biggest trap: importing people hierarchy via the “lead link” role.

We found that the word “lead link” was dangerous because it contains “lead”, which gives it an instant managerial sheen that is hard to rub off. This is multiplied when you combine it with a critical mistake that we made and that it seems you made too: which is to allow a “lead link” for the company as a whole, and to place the founder (formerly CEO) there. If the CEO of the company is the lead link of the anchor circle, then the lead links of other circles are naturally going to be understood as leaders of their circle. Holacracy also gives those lead links the power to invite and uninvite people from roles, which for many translates into the power to fire people. And in comes the people management hierarchy.

In our second iteration of Holarchy, we got rid of the anchor circle lead link, removed the word “lead”, and made sure the link role was understood as administrative/representative, not managerial, by voting mostly more junior people in those positions. I should add that after this Holarchy v2, I am not the link of any circle at GrantTree, and neither is my cofounder. This is a good thing if you are committed to self-management.

This is not to say that I don’t believe Holacracy is a good system. I think it is much better than many other systems for operating companies. However, I think it is important not to be blind to its flaws, and not to fall into the trap of thinking it is the only system available for open cultures, or even the best system for open cultures. Nor it is a necessary step towards open cultures. Many people may be very enthused by the concept of open cultures and yet put off by Holacracy’s rules-based approach.

Holacracy may be the best system for Zappos, or maybe it is not. I would like to humbly suggest that you consider that this may not be the right answer for Zappos, or that if it is, it may need substantial tweaks to adapt it to the Zappos people (rather than trying to adapt the people to Holacracy), and that even if it is the right system for Zappos, it is not perfect yet and you should evolve it when you see its shortcomings, rather than be beholden to a One True Way.

This take the courage to realise that in this step of the Zappos adventure, like in every other before, you are indeed alone: there is no ultimate guidance anyone can give, not even HolacracyOne. Ultimately the decisions of what to do and how to do it are yours. Or, alternatively, once you begin to respect and trust the people in Zappos, you will find, as I did, that you are not alone. There is never any certainty about any path, but when people are truly engaged with open cultures, when they truly embrace its ideas and practices, they take up more of the load than you could imagine before you see it happen.

5. The Agenda of Open Cultures

Zappos is the highest-profile open culture experiment happening right now, but it is not the only one. We are living in a time of change where many companies are adopting the principles that eventually lead to open cultures: respect rather than authority, trust rather than fear, transparency rather than secrecy, responsibility rather than obedience, and so on.

By becoming such a high-profile case, Zappos risks becoming the defining test case for open cultures. By trying to implement Holacracy in an authoritative, top-down manner, or at least by letting it appear that this is what is happening (if that’s a mis-reading), the wrong example is being given to countless companies looking for guidance on this.

This could cause the terrible harm of teaching hesitant founders and CEOs how to implement open cultures the wrong way. And even worse, should the high profile Zappos experiment fail, it may convince many to not even give it a try.

I believe that each company should be run in whatever way is suitable to it. There is no superior or inferior way. But I do believe that I much prefer to work in and with companies that have adopted open culture practices. And as I see the positive effects they have on people, how happy they feel working in environments where they feel respected and trusted and allowed to be themselves, I cannot help but wish that there were more companies operating like this in the world.

Obviously you cannot control the world press coverage of Zappos’s Holacracy story. It is obviously of interest, and many in the press will openly want you to fail so that they can write about a great disaster, which is always more juicy for page views than an untroubled success.

What I would humbly suggest in this case is that you use your time in the spotlight to shine the light on other successful open companies (like MorningStar, Buffer, Semco, Buurtzorg, Medium, etc), so the Zappos story does not become the defining story of teal/open cultures and Holacracy.

Yours Sincerely,

Daniel Tenner
Cofounder, GrantTree